A new regionwide sales tax is the best way to raise the billions of dollars that Metro needs in coming years — and that area governments can’t afford — according to a report released Wednesday by top local administrative and budget officials.
After studying the issue for more than a year, the group said a one-cent-per-dollar sales tax would generate enough money — $650 million annually — to keep the transit system safe and reliable. It also would yield enough extra money to pay for some expansion of the system, such as construction of a second tunnel under the Potomac River between Rosslyn and Foggy Bottom, which would eliminate one of Metro’s major bottlenecks.
The report lent support to calls from D.C. Mayor Muriel E. Bowser (D) and others for a broad-based sales tax to pay for new equipment and maintenance for the 40-year-old system.
But it represented the views only of self-described “technocrats,” rather than of elected officials who will ultimately decide whether and how to find more money for Metro.
A regional sales tax would face major political challenges, by all accounts. Virginia officials, fearing resistance from the Republican-dominated General Assembly, urged that individual jurisdictions be allowed to decide for themselves how to raise the money to support Metro.
The tax plan was prepared by top county and municipal administrators and budget officers organized by the Metropolitan Washington Council of Governments. It was presented at a COG board meeting and was referred to a Metro Strategy Group of elected officials, headed by Fairfax County Board of Supervisors Chairman Sharon Bulova (D), for a final recommendation.
The report said a sales tax has several advantages over alternatives such as a property tax — it would be easier to administer, would capture revenue from tourists and other nonresidents, and is used by other major transit systems throughout the country.
The budget officials also said that despite their initial skepticism, they agreed that Metro’s financial needs are so large and urgent that only a new dedicated tax will solve the problem. They set a challenging deadline of January 2019 for coming up with the additional money.
“It is time to act for the good of the region, and establish dedicated funding to fill the major gap in funding needed for Metro’s capital and maintenance,” said the 37-page report, titled “Technical Panel Final Report on Metro.”
“After examining many different options, the Panel concluded that a dedicated sales tax is the best, most equitable revenue option,” the report said.
The panel’s call for a dedicated funding source is consistent with a plan announced last week by Metro General Manager Paul J. Wiedefeld. But Wiedefeld did not recommend a specific tax, saying that was up to the region’s elected officials and the public.
The COG report differs somewhat with Wiedefeld over how much additional money Metro needs over the next 10 years. It agreed with the general manager that the agency needs an additional $15.5 billion for capital investments in new rail cars, buses and other equipment. But the panel said Metro also needs an extra $1.3 billion over the period to pay for increased maintenance.
In one of the report’s principal findings, it said Metro faces a shortfall of $7.5 billion over the next 10 years between its needs and what the District, Maryland and Virginia are able to provide.
It said that unless a new source of revenue is found, local jurisdictions will have to slash budgets for schools, roads or other priorities.
“We have no idea how to pay for [Metro] without massively cutting our other infrastructure needs,” said District Chief Financial Officer Jeffrey S. DeWitt, who played a leading role in the panel’s work.
Legal and political realities will make it difficult to meet the January 2019 deadline for raising the money. The Virginia and Maryland legislatures must first give approval to suburban jurisdictions such as Fairfax, Montgomery and Prince George’s counties to increase taxes. Then the suburban governments must do so, and referendums may be required in some cases.
The D.C. Council has already voted to back a regionwide sales tax for Metro if the other jurisdictions do so.
The effort could easily get caught up in the desire of many elected officials and interest groups to press Metro to overhaul its governing structure and curb labor costs. The technical report does not address governance or labor issues, but Wiedefeld’s proposal urges several major concessions by unions to hold down costs.
The two money-generating proposals to receive the most attention in the region have been a regional sales tax and a tax on property near Metro stations. The panel also considered other options, including a general property tax, a gas tax, a value-added tax, a commuter tax and an income tax.
The group concluded that a “uniform, regional sales tax” was best, partly because it would be “easily understood by the public and easy to administer.”
A dedicated sales tax also is a major source of funding for most other large transit systems in the nation, including those in New York, Chicago, Boston and San Francisco.
“There’s no tax that does this perfectly,” DeWitt said. “The one that’s used the most and the one that fits the most criteria is the sales tax.”
But Northern Virginia officials are concerned that the state’s General Assembly will balk at endorsing a regionwide tax. State Sen. George L. Barker (D-Fairfax) said the report will hurt his efforts to persuade other Richmond lawmakers to support Metro, because they will think the choice of a sales tax is being imposed on them.
“To a large extent, it does tie one hand behind my back and makes my job much more difficult,” Barker said at the COG meeting.
Other Virginia officials also objected, saying a uniform sales tax would mean that Northern Virginia would contribute more to Metro than the other jurisdictions. That’s because of Northern Virginia’s large population and higher volume of sales to be taxed.
According to the report, with a uniform sales tax, Virginia’s share of the total revenue collected would be 51 percent, compared with 23 percent for the District and 26 percent for the Maryland suburbs.
Loudoun County Supervisor Matthew Letourneau (R-Dulles), who is COG’s vice chairman, called that “a major concern.”
The COG report and District officials said that objection could be solved in the process of implementing the tax, perhaps by reducing some of Virginia’s other contributions to Metro.
“These are all rough edges that can be buffed out,” COG Executive Director Chuck Bean said.
The panel reiterated warnings made in an earlier, interim report about the cost of failing to provide Metro with adequate support.
With no additional funding, it said, rush-hour delays on Metro will continue indefinitely, at a cost of $153 million to $235 million annually. Failure to fund Metro also will increase safety risks, worsen traffic congestion and slow economic growth in the region, the report said.